NGL Energy Subsidiary to Pay $25 Million to Settle Fuel Credit Charges -- Update
BY Dow Jones & Company, Inc.
— 4:27 PM ET 09/27/2018
An affiliate of NGL Energy Partners LP ( NGL
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) will pay a $25 million civil fine to settle allegations that it mishandled renewable fuel credits.
The affiliate, called NGL Crude Logistics LLC, is an operating entity at NGL, a Tulsa, Okla.-based company that offers a range of services related to the oil, refined products and water sectors.
In a statement Thursday afternoon, NGL said it "was not involved in any way in the alleged violations," which occurred before it purchased the affiliate's predecessor company, Gavilon LLC, in December 2013.
After buying millions of gallons of biodiesel on the open market in 2011, Gavilon generated 36 million credits, or so- called renewable identification numbers, according to a statement from the Justice Department and Environmental Protection Agency.
Gavilon sold the fuel credits to other entities and sold the biodiesel to a company in Iowa, the regulators said. That firm subsequently reprocessed the biodiesel, creating a second set of fuel credits, according to the government, and sold the same fuel and newly created second set of credits back to Gavilon.
Gavilon was then able to sell most of the second set of credits, according the statement from the government agencies.
Mike Krimbill, chief executive at NGL, said in prepared remarks the company inherited this situation after Gavilon in 2013.
NGL is "disappointed that the government sought to hold NGL financially responsible for actions committed by a predecessor company (and its management) some two years prior to NGL's purchase of the company," he said.
But the company is pleased to "resolve this matter on a negotiated basis that avoided the additional legal expense and uncertainties associated with a trial," he added.
In July, a federal judge in Iowa found the NGL affiliate that is the successor company to Gavilon was liable for failing to retire credits when it initially sold the biodiesel and for transferring invalid credits, according to the Justice Department and EPA. The judge also said the NGL entity was liable for pushing the scheme on the Iowa company that reprocessed the fuel, causing it to violate federal renewable fuel program rules, the regulators said.
In addition to paying the $25 million civil penalty, the NGL affiliate will retire 36 million fuel credits it controls, worth $10 million.
The credits are generated when a company producing a qualifying renewable fuel. They can be bought and sold. Refineries and other energy companies use them to meet renewable fuel production requirements.
Shares of NGL were up 0.7% to $10.75 in mid-day trading, but hav
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